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In The Press Back
The Real Dealby E.B. Solomont
Nov 1, 2015
Concessions pick up as rental market slows down
With the rental market heading into its slowest seasons, landlord concessions are back. Beyond the standard month of free rent, though, some building owners are trying to entice renters with more upscale offerings: think flat-screen TVs and in-home massage services. And when it comes to new construction, developers are loading buildings with amenities to attract tenants and justify high prices.
“It’s not uncommon to have gyms, lounges and kids’ rooms as a baseline,” said Matthew Baron, president of Simon Baron Development, which filed plans to build a 296-unit rental building in Long Island City at the former Paragon Paint Factory.
For example, at Assa Properties and the Chetrit Group’s Cassa Hotel and Residences at 515 Ninth Avenue, residents have access to “a la carte” services, like in-home massages, housekeeping and a travel concierge. Meanwhile, Sky, the Moinian Group’s rental tower at 605 West 42nd Street, has a member’s club that gives residents access to an indoor and outdoor pool, pet spa, NBA-size basketball court and bike valet. At Silverstone Property Group’s 207 Madison Street, a 20-unit rental on the Lower East Side, the building’s lounge has a co-working space.
In Manhattan, the vacancy rate hit 2.69 percent in September, a relatively high number compared to the 1.76 percent rate a year earlier, according to data from appraisal firm Miller Samuel. The average rental price was relatively flat at $4,084.
According to rental giant Citi Habitats, 10 percent of rental deals in September included a landlord concession, up from 7 percent in August.
“Renters are in a great position because they are entering the winter market, where owners are more flexible to negotiate prices or offer other concessions,” said Jon Kestenbaum, an agent at Miron Properties.
For example, at the Coda, a 33-unit building at 114 Ridge Street on the Lower East Side, where one-bedrooms are going for $2,975, the owner recently renovated the units and is offering a free month’s rent to motivate prospective tenants to sign on the dotted line, Kestenbaum said.
At 207 Madison, where three-bedrooms are asking $3,660 a month, Silverstone is offering to pay the broker’s fee to avoid passing along the cost to the renter. And at 444 East 13th Street, where two-bedroom units are asking $3,600 a month, the building owner is installing a free flat-screen TV in every new apartment.
Negotiability isn’t limited exclusively to the rental market.
As the market slowed in recent months, some sellers became wary of losing out on a good offer and adjusted their expectations.
Gabriel Leibowitz, an agent at Warburg Realty, said he’s been involved in deals where the owner threw in light fixtures or blinds, or was willing to do minor repairs in the apartment after accepting an offer. For example, he represented one buyer who put an offer on a $1.55 million condo in Midtown but asked for a punch-list of items to be fixed. The seller was so eager to get the deal done, Leibowitz said, “It was agreed to on the spot.”
During the frenzied market of 2013 and 2014, when inventory was at an all-time low and buyers were burning with pent-up demand from the financial crisis, sellers held all the cards. “There was a period where sellers had a certain feeling of ‘If you want to nickel and dime me, then I’ll just move on,’” Leibowitz said. “Now, there’s a bit more boldness about making requests and less concern over losing the deal.”
In part, those fears are fueled by the influx of new condos hitting the market.
Lee Williams, an agent at the Level Group, said buyers are pushing back against rising prices. “They point to the coming wave of new construction about to enter the market as a force that may equalize pricing and make current sellers more amenable to negotiating,” he said.
In some cases, it’s true that the seller will negotiate, but not all will. Williams has seen some sellers pull their properties from the market in order to relist them in the spring. “The major concern for sellers in this category is they don’t want the listings to sit and appear stale,” he said.
Among new-development condos, developers are outdoing each other on amenities. While they are not doing things like paying the condo’s transfer tax — something they did during the last cycle — the amenities at each successive project announced seem to outdo the last.
Siras Oriel’s Soori High Line, for instance, will have private pools in units, as will 10 Sullivan Street, developed by Madison Equities and Property Markets Group. A number of upper-end developments, including Macklowe Properties’ 432 Park, will have a private restaurant for buyers only.
At 252 East 57th, World Wide Group and Rose Associates are not only offering parking but also an automated parking valet. And downtown at 111 Murray Street, developers Fisher Brothers, Witkoff Group and Howard Lorber will offer concierge private-jet service to residents.
“I don’t think it’s a new trend,” said Kim Myers, an agent at William Raveis NYC, of the jet rentals. “But it seems that new developments are ‘gifting’ more premium amenities in their buildings to attract buyers.”